Madurai (Tamil Nadu), Sep 19 (PTI) Union Finance Minister Nirmala Sitharaman on Friday said with the slew of GST reforms set to come into effect from September 22, a total of Rs 2 lakh crore will be in the hands of the people, boosting domestic consumption.

With the simplification of the Goods and Services Tax from the earlier four slabs to 2 slabs, Sitharaman said Prime Minister Narendra Modi is keen to ensure that the poor and downtrodden, middle class families and the micro, small and medium enterprises (MSMEs) largely benefit out of the GST reforms.

The finance minister was speaking at the 80th anniversary of the Tamil Nadu Foodgrains Merchants Association here.

The new set of GST reforms with a revised tax structure is set to come into force from September 22.

"With the proposed GST reforms, there will be an increase in consumption in the domestic market. The Finance Ministry does not receive the Rs 2 lakh crore as taxes from the public, but it goes back into the economy aiding domestic consumption," she said.

Elaborating, she said, because of the two slab structure, the price of a product which a customer normally buys gets reduced.

"For example, when you buy the same product, say a soap in larger quantities, the manufacturer increases the production. To increase production, he recruits a lot of people, and when there are a lot of people, they pay tax to the income. And there will be revenue to the government as indirect taxes. When this virtuous cycle keeps on happening, it is good for the economy," she said.

To keep it simple, Sitharaman said when there is more spending from the public, there is higher demand. When there is higher production to meet the demand, there will be more jobs. And when there are more jobs, there will be a wider tax base.

To support her point, the finance minister said when the number of entrepreneurs who were paying taxes stood at 65 lakh before GST was introduced in 2017, it did not get reduced to 10 lakh. "But, entrepreneurs understood the benefit and in the last 8 years it has only increased to 1.5 crore," she said.

Congress leader Rahul Gandhi termed the GST as a Gabbar Singh Tax, but it was not a Gabbar Singh Tax. "It (GST) only increased the tax base from 65 lakh entrepreneurs to 1.5 crore in the last 8 years," she remarked.

PM Modi has been insisting that the GST reforms should largely benefit the poor, middle class families and MSMEs in particular, she said.

Sitharaman also took a dig at a political comment whether the government was levying higher taxes for those products all these eight years and now it has been staging a drama that the rates have been cut or completely removed under the GST 2.0 reforms.

"One senior person asks whether the government was levying higher charges for all these eight years (since GST was introduced in 2017). I wish to state here that neither the NDA government nor the Prime Minister is not inclined to do that," she said without divulging further. PTI VIJ KH

GST reform: two-slab structure to boost consumption and widen the tax base, aiding households and MSMEs. GST reform replaces four tax slabs with a two-slab structure to return liquidity to consumers and boost domestic consumption by reducing prices, increasing production and employment, and expanding the taxable base; the measure is framed to benefit low-income groups, middle-class households and MSMEs and to generate indirect tax revenue through a virtuous cycle of higher demand and broader tax participation.